Levy v Miles Continental Cars Limited Reference No. MVD 176/2018 [2018] NZMVDT 162 (11 July 2018)

Last Updated: 17 August 2018

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL

[2018] NZMVDT 162
Reference No. MVD 176/2018

IN THE MATTER of the Motor Vehicle Sales Act 2003

AND

IN THE MATTER of a dispute

BETWEEN CRAIG LEVY

Purchaser

AND MILES CONTINENTAL CARS LIMITED

Trader

MEMBERS OF TRIBUNAL

J S McHerron, Barrister – Adjudicator

R C Dixon – Assessor

HEARING at Christchurch on 13 June 2018

DATE OF DECISION 11 July 2018
APPEARANCES

C Levy, Purchaser
S Lee, Purchaser's Wife
S J Kelly, General Manager of Trader
D J Morris, Service Manager of Trader
A R Lyford, National Service Manager, Volkswagen New Zealand

DECISION

Craig Levy's application is dismissed.

REASONS

Introduction

[1] Craig Levy has spent over 12 months trying to persuade Miles Continental Limited that his Volkswagen Amarok, which he purchased new in January 2017, is defective. Mr Levy has now reached the end of his patience with the vehicle. In March 2018, he notified Miles Continental that he was rejecting it and that he wanted his money back. He now asks the Tribunal to uphold his rejection.
[2] The following issues arise for determination:

• (a) Did Mr Levy’s vehicle fail to comply with the guarantee of acceptable quality?
• (b) Is Mr Levy entitled to reject the vehicle?

Issue one: Did the vehicle fail to comply with the guarantee of acceptable quality?

[3] Section 6(1) of the Consumer Guarantees Act 1993 (the Act) provides that "where goods are supplied to a consumer there is a guarantee that the goods are of acceptable quality". According to s 2 of the Act, "goods" includes vehicles.
[4] "Acceptable quality" is defined in s 7 of the Act (as far as is relevant) as follows:

7. Meaning of acceptable quality

(1) For the purposes of section 6, goods are of acceptable quality if they are as—

(a) fit for all the purposes for which goods of the type in question are commonly supplied; and

(b) acceptable in appearance and finish; and

(c) free from minor defects; and

(d) safe; and

(e) durable,—

as a reasonable consumer fully acquainted with the state and condition of the goods, including any hidden defects, would regard as acceptable, having regard to—

(f) the nature of the goods:

(g) the price (where relevant):

(h) any statements made about the goods on any packaging or label on the goods:

(ha) the nature of the supplier and the context in which the supplier supplies the goods:

(i) any representation made about the goods by the supplier or the manufacturer:

(j) all other relevant circumstances of the supply of the goods.

[5] Whether a vehicle is of acceptable quality is considered from the point of view of a reasonable consumer who is fully acquainted with the state and condition of the vehicle, including any hidden defects.
[6] Mr Levy has owned seven Volkswagens of different types over the years. In deciding to purchase his present Volkswagen, he wanted a vehicle that he thought would be covered by good support, service and a solid warranty system. At the time, Mr Levy was living in Taiwan and flying in and out of New Zealand every month. So it was important to Mr Levy to have a vehicle in Christchurch that he did not have to worry about. Despite this aspiration, the vehicle Mr Levy purchased has been far from worry-free. Over the 12 months preceding his application to the Tribunal, Mr Levy has had to take his vehicle back to Miles Continental to attend to many matters.
[7] Mr Levy’s documentation and submissions at the hearing focused on a number of specific concerns with the vehicle. I will set out each of these alleged concerns below.

Anti-locking brakes

[8] Mr Levy noted that the brakes were applying themselves when he first drove off from a standstill. This issue has now been remedied by Miles Continental and Mr Levy told the Tribunal he is no longer experiencing this problem, but he still does not know exactly how it was fixed.
[9] Miles Continental advised the Tribunal that it had not been able to replicate this fault itself. However, a software update was applied to the vehicle that seems to have corrected the fault.
[10] Volkswagen New Zealand advised that the ABS/ESC control unit had a software error which meant that if the vehicle was slowly rolling forward, the control unit perceived the vehicle as unintentionally rolling backwards when drive was selected on the transmission. This led to automatic braking being applied as an anti-stall protection.
[11] Volkswagen New Zealand reported that the revised software changed the vehicle's response in this scenario and that, after the software revision, there have been no further complaints. There was no suggestion that this fault had caused any specific safety issues for Mr Levy. Because the fault has been fixed with no outstanding concerns, I will not consider it any further.

Apparent discrepancies in age of some suspension and other components

[12] Mr Levy complained that the lower arms on the vehicle looked as if they were new, but the upright arms looked older. Based on this discrepancy in appearance only, with no other evidence, Mr Levy argued that his vehicle appeared to be manufactured from parts of differing ages. Mr Levy also expressed concerns that the transmission looked as if it was older than other parts in the vehicle.
[13] Miles Continental denied that it had ever replaced any mechanical or physical parts underneath the vehicle. It pointed out that the different parts had polished, painted or cast metal surfaces, which will age at different rates. In relation to the bottom arms specifically, Miles Continental indicated that these have a painted surface and that Mr Levy may be comparing them to other parts that are simply cast metal without a painted surface. Miles Continental assured the Tribunal that the vehicle was all original. Neither the Tribunal’s Assessor, Mr Dixon, nor I, consider that Mr Levy has advanced any evidence supporting his allegation that the vehicle is improperly comprised of parts of differing ages. At the hearing, Mr Levy agreed not to press his concerns in this regard and confirmed that they could be put to one side. Accordingly, I will not consider this allegation any further.

Vibrations, and play in a half shaft

[14] Mr Levy complained that he had experienced vibrations coming from the vehicle, mainly through its steering wheel and floor pan, at various speeds between 50 and 80 km per hour. In particular, Mr Levy noted the vibrations were present when he was towing a heavy trailer. He claimed to have produced a quote from a dyno tune company, Spec Performance, to take the vibration away. However, on closer examination, Spec Performance merely identifies a vibration when turning the vehicle on the spot, for which it suggests further investigation. The dyno tuning for which it provides an estimate is not specifically stated to be a means of addressing the vibration identified.
[15] Mr Levy also observed “play” in the right front half shaft, suggesting, in his view, that the differential bearing was faulty. This issue had not been previously mentioned in any of the documentation, and it appears that Miles Continental had not previously been informed of it. I am therefore reluctant to allow Mr Levy to include this matter as part of his claim. However, Mr Dixon confirmed that it is not unusual for there to be some movement in the half shaft, particularly in the differential flange, to allow adequate clearance for the steering mechanism.
[16] Mr Levy produced videos in which he had placed a trolley jack under the rear differential of his vehicle, lifting its rear wheels off the ground. The first of these videos apparently shows the vehicle in normal 4WD operation. The rear wheels, jacked up, move freely when the throttle pedal is depressed. The second video apparently shows the vehicle, again with the rear wheels jacked up, but with the off-road 4WD button depressed. In this video, the rear wheels move freely, but a grinding noise can be heard coming from the front of the car. Mr Levy submitted that this noise related to the vibration issues he had identified. Other than that, it was unclear exactly what Mr Levy was trying to prove through these videos apart from the fact that the vehicle was making a strange noise under the abnormal conditions in the test.
[17] It did not seem that Mr Levy had previously raised with Miles Continental whatever concerns he was attempting to establish through these videos. Its representatives were seeing the videos for the first time at the hearing. They commented that the testing method recorded in the videos appeared unsafe and that Mr Levy was lucky his vehicle did not come off its jack and cause damage to people or property. The noises coming from the vehicle on the video appeared to them to be its ABS and other electronic systems trying to make allowances for the unusual situation of its rear wheels being jacked up in the air.
[18] Mr Dixon and I do not think the videos prove anything that is helpful to Mr Levy's claim and we propose not to make any findings based on them.
[19] Miles Continental’s response to the alleged vibration issues as raised in Mr Levy’s documentation was contained in a letter from a Mr Max van den Bergen, who provides technical support at Volkswagen New Zealand. Mr van den Bergen stated that he drove Mr Levy’s vehicle alongside another equivalent Amarok in order to compare what had been described as “bumpy suspension”. Mr van den Bergen confirmed that Mr Levy's comfort complaints directly related to the utility nature of the vehicle and could be considered as characteristics of its robust suspension and steering design.
[20] Mr van den Bergen took the vehicle on an extended road test in an attempt to replicate the engine vibration Mr Levy had experienced. During this testing, Mr van den Bergen could not observe any abnormal behaviour from the engine or transmission. He purposefully loaded the vehicle in top gear at low rpm and noted that the transmission shifted down at the expected point where the engine load exceeded the capacity of the currently selected gear. Mr van den Bergen confirmed that the injector adaptations and engine load monitoring were correct and that he had ensured that both the transmission and engine computers were at the latest software level.
[21] In addition, Miles Continental have had the vehicle’s wheels balanced at two different external workshops in order to ensure that they are maintained at factory standard. Miles Continental was unable to replicate the conditions involving the towing of Mr Levy’s trailer, but it noted that the vehicle will produce harmonic vibrations that will depend on the way in which it is driven.
[22] Mr Dixon also commented that it is not uncommon for vibrations to exist when there is a different co-efficient of friction between the tyre and road surface. This also explained what was described by Miles Continental as a “hydraulic pulse”, which arises from friction on the ground producing feedback through the steering wheel.
[23] Having regard to Mr Levy’s concerns and Miles Continental’s response, I conclude that Mr Levy has not established that there is any abnormal vibration in the vehicle that a reasonable consumer would find unacceptable.

Speedometer reading higher than actual speed

[24] Mr Levy’s fourth complaint was that the vehicle’s speedometer was consistently over-recording the speed of the vehicle. Mr Levy produced several photographs showing a comparison at a range of speeds between the speedometer reading and that on a GPS unit. This comparison indicates that the speedometer is consistently exaggerating the speed by 10 per cent to 16 per cent.
[25] Mr van den Bergen has advised Mr Levy that Volkswagen’s speedometers are manufactured to tolerance levels specified in international regulations which permit the indicated speed to be up to 10 per cent higher plus 4 km/h than the true speed.[1]
[26] Miles Continental and Mr van den Bergen also referred to the relevant New Zealand in-service certification requirements, which state that a vehicle "must be fitted with a speedometer in good working order that operates while the vehicle is moving forward".[2] Other than that, there are no specific New Zealand criteria for speedometer accuracy.
[27] Both parties accepted that the odometer was recording the mileage of the vehicle correctly. Accordingly, there is no concern that Mr Levy may be paying more in road user charges than is justified according to the distance the vehicle travels.
[28] There does not seem to be any basis for concern that the vehicle will fail its warrant of fitness inspection, as it is fitted with a speedometer that is in good working order that operates while the vehicle is moving forward. Moreover, in each of the examples provided by Mr Levy, the speedometer was operating within the tolerance permitted under international guidelines. That is, in each case, the difference between the speed displayed and the true speed was less than 10% of the true speed plus 4 km/h.
[29] Miles Continental pointed out that it is common across the industry to have an elevated indicated speed on vehicles’ speedometers. It is not obvious that this discrepancy is likely to cause any safety concerns. Any concern about vehicles travelling too quickly because of speedometers that are under-recording speed is addressed by the fact that the tolerance described above only applies where the indicated speed is higher than the true speed.
[30] I do not consider that this alleged defect amounts to a breach of the guarantee of acceptable quality. That is because I do not think that a reasonable consumer would be overly bothered by the fact that the vehicle’s speedometer consistently indicates a higher speed than the true speed. If it is essential for Mr Levy to have a more accurate indication of the speed he is driving, then it would be relatively straightforward for him to install a permanent GPS-derived speed indicator in his car, such as would be found in a conventional satellite navigation system.

Seal in differential leaking

[31] Mr Levy alleges that a seal in the vehicle’s differential is leaking oil. This issue has been investigated by Miles Continental. It says that the vehicle’s differential seal is "misting" or "sweating", but it has not observed any leak. It produced a Volkswagen technical product information bulletin entitled “Oily residues in area of seal for propshaft flange on rear final drive”, which it says relates to the same issue Mr Levy has identified. The product information bulletin contains photographs showing “humid” areas where liquid does not run or drip, defines this phenomenon as “sweating”, and states that it is “acceptable”. Although the grease of the sealing flange of the rear axle differential may become liquid in this scenario, it is described as having “no negative effects”.
[32] Miles Continental’s last inspection of the vehicle was in February 2018. It concluded that the differential seal was only “misting” in the way set out in the technical product information bulletin. However, Miles Continental was quick to add that if, as Mr Levy states, the seal is now dripping oil then it would be happy to replace the seal. Miles Continental says this would not involve major work. On the evidence produced to the Tribunal, it was not possible to assess whether the vehicle is still only "misting" or whether it has started to drip. Mr Levy should bring the vehicle back to Miles Continental if he wants it to look at the differential seal again.

Heater

[33] The heater appears to be leaking cold air, which is a particular problem when Mr Levy is attempting to demist the front windscreen at the same time as warming his feet. In these circumstances, Mr Levy has observed a significant difference in temperature between the hot air coming out of the demister (33ºC) and cold air coming out from the floor vents (15ºC). Mr van den Bergen reported that Volkswagen New Zealand assessed the operation of the air conditioning system and carried out a “successful adaption to ensure the air distribution flaps are fully moving from end point to end point”. However, even after this adaption, Volkswagen noted that a slight air leak is evident from the footwell vents. Unfortunately, it concluded that such a condition is characteristic of the Amarok’s air distribution system. While a flap is present to divert air to the vents selected, a physical airtight seal between the vent tracks does not exist and some bypassed air is expected. As such, the system is performing within its design parameters, according to Volkswagen.
[34] Mr Dixon had some concerns about the reported temperature variation experienced by Mr Levy. He asked Miles Continental’s representatives several questions about the operation of the heating system in the vehicle. Miles Continental advised that Mr Levy may need to make further manual adjustments to the heating controls to try to avoid the less-than-ideal combination of hot windscreen but cold feet.
[35] The heating system installed in Mr Levy's Amarok is not fully automated and relies on manual adjustments. Unfortunately, however, the system does not appear to be well-designed to facilitate the warming of windscreen and feet at the same time. This may be a design flaw in the vehicle. The work-around for Mr Levy may be that he needs to experiment with adjusting the controls to ensure a more even heat distribution between windscreen and feet. While this does appear to be a matter that is incapable of complete cure, it was not clear to me that Mr Levy had exhausted all available options to improve the situation by adjusting the controls. Either way, I do not consider that Mr Levy has established there is a defect indicating any breach of the guarantee of acceptable quality.
[36] Different vehicles have differing standards of heating arrangements. The Amarok's heater may not be as good as heaters in other vehicles. But Mr Levy has not established it is defective. To the contrary, the evidence indicates that it is working as designed. Without evidence establishing that there is a fault with the system, I am not prepared to find any breach of the guarantee in s 6 of the Act.

Defective load-carrying sports lid

[37] When Mr Levy purchased the vehicle it was supplied with an aftermarket utility lid the cost of which was included in the vehicle's total purchase price. The rails on the lid have had to be re-affixed twice as they have been lifting, causing annoying rattles. Miles Continental appears to recognise a defect in the quality of this aftermarket lid unit and has offered to refund the cost of the lid or credit its value towards a new higher-priced lid. Mr Levy objects. He considers that Miles Continental should supply him with a new lid of a different, more expensive model, and not require him to pay the difference in cost.
[38] I do not accept that Mr Levy is correct. If Miles Continental has acknowledged that the existing sports lid is defective, and not capable of repair, it does not need to do any more than what it has offered him, which is to refund him the cost of this aftermarket part.[3] It is certainly not grounds for rejecting the whole vehicle.

Surface rust

[39] Mr Levy produced several photographs of the underside of the vehicle, which show a small amount of surface corrosion. He also produced a photograph of the vehicle's tailgate strap which indicates that it has moderate corrosion.
[40] Mr van den Bergen reports that surface corrosion was identified on the vehicle's skid plate during an underbody inspection. Mr van den Bergen concluded this was “standard surface abrasion given the current road conditions in and around Christchurch”. Volkswagen took the preventative measure of removing the surface corrosion and refinishing it with anti-corrosion paint. But Mr Levy complains that some of this paint is now wearing off and the corrosion is returning.
[41] In respect of the tailgate strap, Miles Continental has offered to replace that part under warranty.
[42] Mr Dixon observes that it is not uncommon in modern vehicles for there to be no specific corrosion protection applied to the high strength steel that is used, apart from a phosphate treatment to stop rust bleed. Accordingly, when the black paint that is applied to the underparts of the vehicle gets chipped off, it is common for surface corrosion to appear.
[43] I note that the vehicle has a six-year warranty for rust. If Mr Levy observes any more significant corrosion arising (and I stress that the photographs he has produced do not show any significant corrosion other than in the tailgate strap), then he would of course be entitled to a remedy under his warranty, as well as under the Act. However, the present level of surface rust present on the vehicle, according to the photographs produced by Mr Levy, does not meet the threshold for a breach of the guarantee of acceptable quality. In Mr Dixon's view, which I adopt, it is nothing more than a reasonable consumer would regard as normal and acceptable in an eighteen-month-old vehicle that has travelled over 21,000 km.

Several other problems not previously raised with Miles Continental

[44] Mr Levy also included a number of other matters in his complaint, including:

• an oil leak from the power steering;
• an oil leak from the motor;
• a problem with the sound system;
• that the plastic liner on the back of the ute does not fit properly and is popping its taped seams; and
• a fault with the electrical plug for the trailer.

[45] Miles Continental protested that these matters had not been raised with it before Mr Levy made his application to the Tribunal. Miles Continental says it has not been given an opportunity to check these matters and make any necessary repairs. Miles Continental indicated that it would be more than happy to assess any of these issues and make any repairs under the vehicle’s warranty if necessary. Mr Levy will need to follow these matters up with Miles Continental himself. Until he does, the Tribunal is unable to take them further.

Conclusion

[46] Mr Levy has experienced a number of defects with the vehicle that he has found extremely annoying, both in isolation and cumulatively. However, I am not persuaded that any of these matters, whether looked at separately or together, amounts to a breach of the guarantee of acceptable quality in s 6 of the Act. Rather, I think Mr Levy has had a number of small concerns, some of which have substance, others do not. Overall, however, no outstanding quality concerns exist that would lead to any entitlement to a remedy under the Act.
[47] In each case, Miles Continental has demonstrated that it has been attentive to Mr Levy's concerns in order to ensure that any problems with the vehicle are addressed as and when they arise. It has gone to considerable lengths to investigate the concerns that have been raised and to make any repairs that can be made in respect of those that have been established as faults.
[48] Mr Levy told us during the hearing that “when you start looking for things you keep finding things”. For whatever reason, Mr Levy has reached the view that he does not like this vehicle anymore and that he wants rid of it. To establish his case for doing so, he has understandably focused on compiling a list of as many faults as he possibly can. While there have undoubtedly been a few small faults with this vehicle, it seems that these have been magnified by Mr Levy in his desire to force Miles Continental to take the vehicle back. To apply his own expression, Mr Levy has started looking for things to justify his decision to reject the vehicle and has kept finding more and more things he does not find acceptable. The Tribunal has to apply the statutory test in the Act, which requires an objective assessment of what a reasonable consumer would regard as acceptable. By and large, according to this test and on the evidence available to the Tribunal, the matters Mr Levy complains about do not amount to a breach of the Act.

Issue two: Is Mr Levy entitled to reject the vehicle?

[49] Mr Levy is not entitled to reject his vehicle. That is because, as set out above, I have concluded that there has been no breach of the guarantee of acceptable quality in this case.
[50] As Mr Levy has not established a breach of the guarantee of acceptable quality, let alone one that would satisfy the test for a breach of a substantial character in s 21 of the Act, he is not entitled to reject the vehicle.
[51] Even if Mr Levy had established a breach of the guarantee of acceptable quality, he has left it far too long before rejecting the vehicle. Section 20(1)(a) of the Act provides that the right to reject goods conferred by the Act is lost if not exercised within a reasonable time. Mr Levy purchased the vehicle in January 2017 and has now driven it for approximately 21,000 km. On any assessment, if he genuinely wished to reject the vehicle, he would have needed to do so long before March 2018, some 14 months after purchasing it.

[52] For these reasons, Mr Levy’s application must be dismissed.

J S McHerron
Adjudicator

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[1] United Nations Economic Commission for Europe Agreement Concerning the Adoption of Harmonized Technical United Nations Regulations for Wheeled Vehicles, Equipment and Parts which can be Fitted and/or be Used on Wheeled Vehicles and the Conditions for Reciprocal Recognition of Approvals Granted on the Basis of these United Nations Regulations, Addendum 38 – Regulation No. 39, E/ECE/324/Rev.1/Add.38/Rev.2 − E/ECE/TRANS/505/Rev.1/Add.38/Rev.2 (2018) at [5.4].

[2] New Zealand Transport Agency "Vehicle Inspection Requirements Manual: In-service Certification (WOF and COF)", https://vehicleinspection.nzta.govt.nz/virms/in-service-wof-and-cof/general/vehicle-interior/speedometer at 7‒12 Speedometer; Land Transport Rule: Vehicle Equipment 2004, r 2.2(1).

[3] Consumer Guarantees Act 1993, s 19(1)(c).